Tuesday, June 10, 2014

Phillip Unit Trust Promotions! Bond Funds Galore!

I have to admit, for the past few months I have been so busy studying for my CFA, beginning to dabble in individual stock picking, that I have been neglecting my coverage of unit trusts!

Well, good news today for people that use unit trust as an investment vehicle! (Please don't troll me about the disadvantages of unit trusts. I am WELL AWARE. Unless of course, you have better alternatives for those specific asset classes.)

After hearing my Dad once again got conned at the bank (I shall not say which one, I'm sure they are all equally as bad), and bought a unit trust and paid 3% sales charge on it using his SRS money, I was furious. I have told him about cheaper alternatives, and I have told them to at least consult me first. Feeling very betrayed now. I went to the Phillip website to ensure that my assumptions were right. And they were: You can use your SRS money to purchase unit trusts through Phillip.

Anyway, besides the everyday low discounted rate of only 0.75% on most of their unit trusts, they are often running promotions of certain unit trusts and offer 0% sales charge. Yes, 0% sales charge, I'm not even kidding.

My favourite bond fund is currently in the promotion now, that is why I am so excited.

I have written about this UOB bond fund before. Basically to me, it is a very well-run, actively managed bond portfolio that focuses on total SGD returns, while playing it very risk adverse but targetting upsides. Nominal NAV returns of roughly 4% over the long term, with a negligible 3.4% maximum drawdown in 2011. This data is from 2001. Say whut.




As this is my favourite "safe" bond fund, I have quite a bit of my allocation in it. As long as I'm beating inflation with so little risk, I am pretty happy about it. When my super risk adverse friends ask me about what I would recommend to scared ponies like them, this is always what I recommend because I think I understand this unit trust quite well. I have even read through their annual report. Who else reads through unit trusts annual reports? Come on, raise your hands. None of you. I knew it.

On top that UOB bond fund, there are a few other unit trusts now on promotion that I think could be useful investment vehicles for many people.

Nikko AM Short Term Bond Fund - 0.3% expense ratio
JPM Global Corp Bond Fund - 0.8% expense ratio
JPM US Agg Bond Fund - 0.9% expense ratio

These are all 3 bond funds that I have owned or still currently hold, and I do think that they can be useful for a range of people looking for different attributes.

The Nikko AM STBF is basically the most humji unit trust ever. It's pretty much a fixed deposit or a money market fund, and that is how you should look at it, especially so when now there is no sales charge to purchase the fund. Expense ratio is very low, but returns are low as well, about 1.7% if I recall.

The JPM Global Corp Bond is a compelling case. At just 0.8%, it has one of the lowest expense ratios of all the unit trusts in Singapore, and I think it is quite a bargain, considering that it is a global corporate bond fund. The geographic diversification that you get, as well as exposure to this niche asset class. An extra cherry on the top is that it is monthly distributing, meaning that it is compounding monthly the current yield!

The JPM US Agg Bond fund is another curious case. It has a slightly higher expense ratio at 0.9%, but I must highlight, it's returns are hedged. Hedging is not cheap, but hedging is effective, especially against a single currency that has been steadily depreciating against the SGD. With high credit ratings, the spreads are also thinner, so hedging smooths out returns by removing FX volatility. Again, it is monthly distributing, and hence, monthly compounding as well. I do like it a lot!

I would suggest anyone looking for a notch above super safe investments to look at either the Nikko STBF or the UOB Bond fund. Of course, I would recommend the UOB Bond fund for a variety of reasons. I think the risks stepping up to the Nikko STBF are very similar to the UOB Bond fund, but the UOB Bond fund delivers better risk-adjusted returns.

Those who have always heard of the magical 60/40 portfolio touted by many, the JPM US Agg Bond fund is downright the most fantastic proxy of the bond 40% of those portfolio. I'm not a long run fan, but now it looks good.

I would recommend the JPM Global Corp Bond fund to anyone who would like to take a bit more risks in their bond portfolios and juice up their returns. More risks usually comes with more returns. However, diversification of geography, currency and issuers, all with investment grade status, I think the risks are quite muted and more towards systematic ones, such as a global credit crisis or interest rate spike.

If only my OCBC current account did not offer me 3.05% on my cash, I would definitely jump on the bandwagon and substantially increase my holdings in these bond funds!


  1. How do I buy this UT?

    1. Hey Anon,

      you can browse for those funds from the Phillip website here: http://www.poems.com.sg/unittrust/



Observe the house rules.